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European gas

Prompt gas prices should continue to find support this week from a combination of Norwegian production constraints and forecasts for another several days of unseasonable cold. Last week, similar dynamics pushed the TTF D+1 to average 19.32 €/MWh, up sharply from 18.10 €/MWh in the week to 3 November, while the M+1 contract added 8% w/w to close at 19.77 €/MWh.

Below-average temperatures are expected to support LDZ demand. Meanwhile, French nuclear outages are still running around 21 GW, only 1 GW less w/w, as outages were extended at a dozen units last week. French hydro levels should also lend some support to gas-fired power generation in the region. A mitigating factor will be high wind generation over the coming weekend, which is expected to once again curb thermal generation, ultimately leaving power sector gas demand down by about 9 mcm/d w/w at 0.15 bcm/d, according to our current forecast.

Norwegian receipts into Europe should drop on Wednesday as planned maintenance cuts production capacity by 20 mcm/d for the 15-20 November gas days. Some of the lost production could be offset by ramping up flows from flexible fields, but a net drop in exports is likely.

We expect UKCS flows and Dutch production to be broadly unchanged w/w, although given several days of colder-than-normal weather forecast for this week, some Dutch supply uptick could be seen. The call on Russian gas should remain strong, keeping Russian flows around 0.20 bcm, or 20 mcm/d higher y/y.

Sendout from LNG terminals is harder to judge. Given what looks like a tight supply-demand balance, LNG capacity holders could be encouraged to maintain sendout. Although port receipts are expected to be a touch higher this week at 0.25 bcm, they will once again be down, by hefty 0.33 bcm y/y. France and Belgium are the only Northwest European importers scheduled to receive LNG this week.

Europe posted a 1.3 bcm stockdraw in the week through 11 November, as cold weather boosted LDZ demand. The weather last November was considerably colder and supported a much larger stockdraw, meaning the y/y storage gap had shrunk to just 1 bcm by 11 November 2017.

For the coming week, there is little in the way of downside drivers, with HDDs and res-com demand looking to be marginally higher w/w, LNG still a rare commodity in NW Europe and an unseasonal Norwegian outage. The upside now looks bound at 20.6 €/MWh, the next higher fuel switch trigger. While it may seem unlikely that the market will price all the way up there in November, an extension to the cold weather forecasts, particularly into early December, could push prices to that higher level.